"Funding remains tight and there is uncertainty over how the banks will refinance when the blanket guarantee scheme ends," said Matthew Taylor, a senior director in Fitch Ratings' financial institutions team.

"Overall, however, Fitch considers that their funding situation will remain manageable, helped by the extension of a less comprehensive guarantee scheme until the end of 2010 and access to ECB funding."

Mr Lenihan has said he would like to extend most of the guarantees, but has hinted that not all lenders will be covered under the new guarantee.

Profit at Bank of Ireland and Allied Irish will be under pressure this year even when the cost of transferring loans to NAMA is excluded, Mr Taylor added. Loan impairment charges are likely to decline but remain meaningful, while restructuring charges are likely to further depress pre-tax profit, he added.

For 2011, expectations of gradual improvement in the economy, a reduction in loan impairment charges and the absence of losses on the sale of loans to NAMA should all contribute to a significantly better, if still muted, performance.

Irish banks are not the only lenders causing concern at the moment. A Fitch survey earlier this week showed investors are becoming increasingly concerned that European banks may struggle to refinance their debt that matures over the next 12 months.

Unlimited

The European Central Bank has offered banks unlimited dollar and euro loans for as long as 12 months to prevent a funding crisis.

That's made it harder for governments to wean banks off life support as well as the short-term financing that regulators blame for the credit crisis.

European governments aimed to use their first co-ordinated stress tests to reassure investors about the health of financial institutions and encourage them to resume longer-term funding to banks.

Fitch said yesterday that Allied Irish Banks and Bank of Ireland may be helped by improved investor confidence after they both passed recent stress tests.

"Early signs suggest that investor confidence has since improved towards the banks which, if maintained, may ease the banks' access to funding," Mr Taylor said.

However, Mr Taylor added that the continuing reliance of the banks on the State guarantee "raises questions for investors who have concerns over the dependability of the guarantees."